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Fifth Circuit Affirms decision to hold assignor solidary liable on Joint Operating Agreement: Chieftain Int'l (U.S.), Inc., Hunt Chieftain Dev., L.P.. Hunt Oil Co. v. Southeast Offshore, Inc.

pby Elisabeth Lorio/p pThe United States Court of Appeals for the Fifth Circuit recently affirmed the United States District Court for the Eastern District of Louisianarsquo;s decision to grant partial summary judgment in favor of the operator co-owner in a dispute over liability after a fellow co-ownerrsquo;s assignment of lease interests governed by joint operating agreements (JOAs).nbsp;Southeast acquired ownership of fractional working interests in two oil and gas leases in the Gulf of Mexico governed by two separate, yet nearly identical JOAs.nbsp;After acquiring the interests in the leases, Southeast became a party to and assumed the rights and obligations under the JOAs.nbsp;Hunt, a co-owner and operator of the leases, advanced 100% of the costs of operations and later billed the other co-owners for their virile portion.nbsp;After a number of years, Southeast ceased paying Hunt for its share of the expenses.nbsp;Subsequently, Southeast entered into a written assignment with South Pass Properties, South Pass assuming all of Southeastrsquo;s rights and obligations under the leases and JOAs.nbsp;nbsp;South Pass, however, never paid the outstanding balance owed to Hunt./p pHunt filed suit against both Southeast and South Pass alleging that Southeastrsquo;s assignment did not release Southeast from its obligations under the JOAs.nbsp;The district court agreed, finding Southeast solidary liable, as the language of the JOAs did not unambiguously effect a release of Southeast.nbsp;The Fifth Circuit affirmed the decision of the district court, holding that an assignee and an assignor remain solidarily liable to the assignorrsquo;s obligations to a third party unless third party releases the assignor.nbsp;The appellate court found that the record was devoid of any effective release of Southeast by Hunt.nbsp;In its decision, the Court rejected Southeastrsquo;s argument that the language of the JOA served as a release of Southeast from its liability after it assigned its interests to South Pass.nbsp;Since the JOAs did not contain a clear and unambiguous release of Southeast by Hunt, Southeast was found solidarily liable for the obligations under the leases and JOAs./pimg src="http://feeds.lexblog.com/~r/TheEnergyLawBlog/~4/492590390" height="1" width="1"/

Full post as published by The Energy Law Blog on December 22, 2008 (boomark / email).